Alimony obligations do not end in retirement. Thus, a retiree must continue to pay court-ordered alimony funds to his or her ex-spouse, cutting into monies they receive as retirement funds including pensions and investment accounts like 401(k)s.
Retirement funds and pension benefits are viewed as marital assets in a divorce, according to DivorceNet
So-called "double-dipping," however, is frowned upon.
Free Retirement Calculator: When Can You Retire? — Click Here to Find Out
"If the pension benefits are equitably distributed during the divorce, then these pension benefits can’t be used later on for alimony purposes. In simpler terms, a dependent spouse can’t receive a share of the pension, and also receive alimony from the pension benefits," Mediation Associates of NY and NJ said
The legal website divorcesource.com said that pension and retirement
accounts can be garnished to force a spouse to adhere to an order of alimony.
Under federal law, Social Security benefits may also be garnished to collect court-awarded alimony, according to the Social Security Administration
"Obtaining your back alimony by trying to seize your ex-husband's pension and retirement monies will not be an easy task," Divorcesource said. "However, if your husband has been a 'wily coyote' and if he is simply not paying, then seizing or garnishing his retirement monies may be your last chance to get paid."
Both spouses need to understand tax ramifications that occur with investment accounts and alimony payouts. Otherwise, they can get into big tax trouble, according to DivorceNet.
Early distributions taken before a spouse turns 59 1/2 get 10 percent tax penalty on top of income-taxes paid.
How Soon Can You Retire? Free Test Shows You When — Click Here
"An exception to this rule, however, is a transfer of the retirement plan (or a portion of it) to a spouse as part of a divorce settlement," DivorceNet said, noting the importance of receiving a Qualified Domestic Relations Order (QDRO) when assets in a split are transferred.
If a divorcing spouse received assets in a plan like a 401(k), those are subject to 20 percent mandatory withholding, DivorceNet said. To avoid that, the funds can be transferred directly into another retirement account.
© 2021 Newsmax. All rights reserved.